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Help with Excel formula

Posted on 2011-09-17
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Last Modified: 2012-05-12
I'm trying to come up with an Excel formula that shows the require volume growth we would need to see from a customer, after we give them a discount, that will generate the same margin.  

For example, lets assume we have a customer that buys $1,000 worth of product in a month and has a margin of 20%.  If we offer him a concession like free freight on all his orders, and we assume that concession costs 5%, the new margin from that customer is now 15%.  I'm looking for the formula that shows that instead of $1,000 in revenue, we now need to get $1,333.33 in revenue to generate the same $200 in profit.

Attached is the spreadsheet I'm working with.  I'm trying to show, for customers of various margins, how much incremental volume we would need to get to pay for each of the concessions.  I feel like this should be simple, but I can't figure it out.  I'd prefer to use a native formula, but i'm open to a macro or custom function that uses the goal seek feature... Cost-of-Concessions.xlsx
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5 Comments
 
LVL 39

Expert Comment

by:nutsch
ID: 36554639
in C3
=1/((C$2+$B3)/C$2)

Thomas
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LVL 6

Author Comment

by:NULL_ReferenceException
ID: 36554660
I had that formula, but I don't think it works.  See my proof in cells E10:J12.

 Cost-of-Concessions.xlsx Cost-of-Concessions.xlsx
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LVL 39

Assisted Solution

by:nutsch
nutsch earned 400 total points
ID: 36554759
It depends on whether your condition applies to the cost or the price.
I'm out all day but I'll pick up later tomorrow unless somebody else jumps in.

T
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LVL 6

Author Comment

by:NULL_ReferenceException
ID: 36555206
Using the last example I posted, I'm looking for a formula that could go in cell I12 that ensures that cell J12 = J11.  The cost never changes.  The price changes, which means at a lower price, we need to sell more units.  I'm trying to determine how much incremental volume is required to generate the same gross profit.
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LVL 50

Accepted Solution

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Ingeborg Hawighorst (Microsoft MVP / EE MVE) earned 1600 total points
ID: 36555319
Hello,

using the table in E10:J12 in your latest example:

If row 11 is your baseline, then use this in I12

=$J$11/H12

Add a few more rows of data with the same cost and varying margins and copy the formulas down. Column J will show the same value, column I will show the required volume increase/decrease, based on the baseline in row 12

see attached

cheers, teylyn
Cost-of-Concessions--1-.xlsx
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